Ameritech Corp. has tapped into what it hopes will be a huge telephone-service market by signing a 25-year pact with a Chinese company.
The Chicago-based regional phone company initially will build and help operate a digital celluar telephone network in the city of Taiyuan, the capital of Shanxi province.
“This is the first joint venture in which China will build together with an American telecommunications company,” said Walter Catlow, president of international business development and operations for Ameritech. He said other companies have signed memorandums of understanding, but not for specific projects.
Under the deal with China United Telecommunications Corp., a private company formed last year after the government decided to allow competition, the joint venture will build a network of 10,000 digital cellular lines by the middle of 1996.
The network eventually will grow to 30,000 lines.
Ameritech also will help install and operate switching equipment to connect the networks in the Taiyuan area as well as a small number of regular telephone lines.
Catlow said that Ameritech initially will invest 80 percent of the capital, but that over time the stake will be reduced to 49 percent. He declined to disclose the amount of Ameritech’s investment.
Investors in China always cite the vast potential market of the most populous country on Earth. Ameritech is no exception, although Catlow said the company has yet to look beyond Shanxi province.
“A good area like ours in the U.S. will grow about 6 percent a year, and in central and eastern Europe the growth rate will be 15 to 19 percent,” he said.
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“In China, we plan for growth of 35 to 75 percent-you just can’t comprehend it.”
With a population of 1.2 billion, China has one of the lowest rates of telephone penetration in the world-less than 3 phone lines per 100 people-according to Catlow.
“China is adding the equivalent of a U.S. telephone operating company every 12 to 18 months,” he said. “It is just incredible growth.”
Taiyuan, with close to 3 million people, has a telephone penetration of about 8 percent, Catlow said. It is about 300 miles southwest of Beijing.
Shanxi province has a population of 30 million and is China’s principal coal mining area. It also produces steel and recently has seen a resurgence in banking, Catlow said.
While this is the company’s first China venture, Ameritech has cellular interests in Norway and Poland, interests in phone companies in New Zealand and Hungary, and business-to-business directories in Germany and nine other European countries. Ameritech opened its Beijing office in April.